Aconex IPO signposts VC exit

Aconex’s private equity partner Francisco Partners will exit the business comforted by a US$23.5 million cash compensation payment.

The Australian Business Review (see also report by Reuters) underlines one impact of the resurrected Aconex IPO: US private equity firm Francisco Partners will terminate its involvement in the Melbourne-based SaaS construction collaboration technology business, just over six years after it headlined a potential AU$107.5m (£48.8m) private equity investment into Aconex in September 2008.

Aconex later reported that this new equity was in two tranches: an initial $57.5m (Au$44.85m), and an additional ‘acquisition tranche’ – though this was rarely dipped into (if at all): Aconex’s only deal was to acquire Grazer in June 2012.

The ABR says:

Francisco Partners is finally able to realise its investment in Aconex worth more than $62 million, after the construction software company relaunched the float today after slashing the deal size.

Aconex is raising $140m at $1.90 per share, according to its prospectus lodged earlier today. That includes $50m through the issue of new shares and $90m by the sale of shares held by existing shareholders.

The offer size has been slashed from a previous target of $230m. Vendors were previously attempting to raise that amount at $2.20 a share, but had to shelve the plan recently due to concerns about post-IPO performance.

Francisco Partners, a PE firm focused on technology investment, holds a 23.9 per cent stake in Aconex and will sell all of its shares through the IPO, worth about $62.4m based on the new issue price.

Aconex founders Leigh Jasper and Rob Phillpot, non-executive directors and executive management will retain a majority of their existing holdings in the company and hold a combined 55.2% stake after the IPO, expected on 9 December 2014. The revised price suggests an Aconex market value of around $312m.

On the face of it, it looks like Francisco Partners’s investment in Aconex hasn’t yielded a huge return. However, the Aconex prospectus (p.20) says: “US$23.5 million will be paid to Francisco Partners as a cash compensation payment in consideration for agreeing to the conversion of the Class A Preference Shares” (21 November 2014 update: in comments on a previous post, Francisco Partners total profit was calculated as around US$32.4m – “equivalent to a touch over 9% p.a. compound interest over 6.2 years” – thanks, Bob).

Of the rest of the proceeds of the flotation, Au$16.2 will be retained by the company.